Analyst Note
| Ioannis Pontikis, CFA |Nestle reported a sales update for the nine months of fiscal 2020, with organic growth of 3.5% (real internal growth of 3.3%, pricing of 0.2%) ahead of company-compiled consensus estimates (2.3% real internal growth, 0.5% pricing). In the third quarter, growth continued to be supported by the retail channel due to elevated demand for at-home consumption with the out-of-home channels remaining significantly negative, though at a moderating pace versus the previous quarter. Notably, management upgraded growth guidance for fiscal 2020 to "around 3%" (versus 2%-3% previously, 2.5% in our model and 2.9% for company-compiled consensus). We plan to slightly increase our CHF 91 fair value estimate for Nestle to account for better third-quarter performance and higher fiscal 2020 organic growth guidance numbers. Although shares are expensive at current levels, we need to recognize Nestle's resilient performance throughout the coronavirus pandemic so far, which we think reflects the group's wide moat and a function of a diversified portfolio of brands, categories and sales channels that are still largely relevant and in line with consumer trends.